Murdoch's digital bust-up escalates

Partners in Rupert Murdoch's digital alliance launched a war of words yesterday, fuelling expectations that the four-way deal to launch digital TV on the Continent was doomed.

Sources at BSkyB, 40 per cent owned by Rupert Murdoch, reacted angrily to suggestions that the alliance with Bertelsmann, Canal Plus and Havas had already failed, but none the less blamed Bertelsmann for the rising tensions.

"We know how to deliver, and they only know how to deal in political palaver," said a Sky source, referring to BSkyB's record as a pay-TV broadcaster in the UK and growing fears at Sky that Bertelsmann is dragging its feet on introduction of a digital bouquet of programming in Germany by autumn.

A spokesman for Bertelsmann responded in kind, saying: "BSkyB started this whole mess, not us," referring to a letter sent early this week by Mr Murdoch demanding clarification of Bertelsmann's intentions toward the alliance. That letter fuelled reports about growing tensions.

The harsh climate dates from Bertelsmann's surprise decision early this year to merge its television interests with CLT, the Luxembourg-based media company, which plans to launch a French pay-TV operation in direct competition with its alliance partner Canal Plus.

That deal seemed to go against the rationale of the four-way alliance, which had been aimed at developing digital TV in Germany and elsewhere without jeopardising each partner's stranglehold on its home market.

Canal Plus also weighed in yesterday, complaining that Bertelsmann seemed "too quick to declare the alliance at an end," and warning that a collapse of the agreement could jeopardise other joint ventures between Bertelsmann and Canal Plus in Germany.

The threats to the alliance have complicated the competitive climate in Germany, where two rival systems - one backed by Bertelsmann and the other by the Bavarian media giant Leo Kirch - are vying to dominate the digital revolution.

BSkyB is interested in taking a 25 per cent stake in Premiere, jointly owned by Bertelsmann, Canal Plus and Mr Kirch. But a deal whereby Canal Plus and Bertelsmann would each sell a 12.5 per cent to BSkyB has so far been blocked by Mr Kirch.